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Oakland Army Base - Phil Tagami v. Michael Johnson

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The giant 100-acre Oakland Army Base is the focus of a development competition between two groups led by people well-known to many Oaklanders: "AMB/CCG" (for AMB Property Corporation and the "CCG" is California Commercial Group) is directed by Phil Tagami, of California Commercial Investments, and who redeveloped two Oakland landmarks the Fox Oakland Theater and the Oakland Rotunda, and Federated Oakland Associates, who's boss is Michael Johnson, the developer of several multi-unit housing projects in the San Francisco Bay Area, and the builder of the San Francisco version of Yoshi's Jazz Club.

The Oakland Army Base 

The developers are engaged in a competition with the Oakland City Council as the final "decider". The winner gains the right to enter into an "Exclusive Negotiating Agreement" with the Oakland Redevelopment Agency, which will lead to the production of a kind of contract called the "Disposition and Development Agreement" or "DDA" that is the guiding agreement stating what developer and redevelopment agency will do. The objective is the creation of what will be a "new town in town" given the size of the land area.

Today (Wednesday) the Oakland Tribune reported that the City Council's Community and Economic Development Committee could not get the majority votes necessary to move to the full Oakland City Council with a recommendation on July 21st. The vote was 2-1-1: with Vice Mayor Ignacio De La Fuente and Councilmember Patricia Kernighan voting for AMB/CCG and Councilmember Jane Brunner and Councilmember Larry Reid voting abstaining and voting for Federated Oakland Associates respectively. Brunner said she needed more information and wanted it before the matter was brought before the City Council.

Just looking at the two proposals, I can tell you what's missing from both without having talked to anyone about them. A bit of background: it was my job to review such proposals for Elihu Harris when he was Oakland's Mayor. I worked for him in the capacity of "economic adviser" from 1995 to 1999, then from 1999 to 2001 headed on the Oakland Super Bowl effort.

My job for Mayor Harris was to represent him on the same Community and Economic Development Committee the Tribune referred to today. My specialization was in reading development spreadsheets because of my background in urban planning and experience with the Oakland Redevelopment Agency; I could comb through one and explain what the strengths and weaknesses of a proposal to council were. I could also determine what information was missing from a fiscal presentation or proposal.

AMB/CCG: Long on capacity, short on complete cash balance numbers

The AMB/CCG proposal touts the financial power and real estate development and acquisition experience of AMB Property Corporation. But the problem with the proposal is actually something Phil Tagami (who's my friend) and I used to talk about frequently: it has a lot of "pretty pictures" and little numerical substance, even in the proforma. What it lacks is a full 10-year presentation of the full cash balance - even if the results are in the "red" - which is a possible and expected fiscal picture of what is to be an enormous mixed-use development project.

In the main proposal there are a number of sheets that read "To Be Determined" in large letters, which sends up a red flag for anyone on the City Council, and certainly would for me. What the City Council wants to see is some assurance that a proposed development will throw off enough cash to pay for itself over time and if that's not the case, how much the Oakland Redevelopment Agency will have to contribute should it fall into the red (which means it has generates more in expenses than revenues).

That kind of fiscal presentation is what's missing from the AMB/CCG proposal. The proforma is there with the 10-year revenue estimates, but absent the overall cash balance (revenues minus expenses) forecast sheet. By contrast, its in the Federal Oakland Associates proposal itself (and they provide the proforma), and they're bold enough to show a positive net operating income over time.

While the Federal Oakland Associates proposal is long on the kind of concise fiscal representation the Council wants to see as well as the kind of minority representation the Council (at least part of it) wants to see, its short on the development power presented by the the AMB/CCG team. Not that Federal Oakland is weak - not at all - but Phil's adding of AMB Property Corporation to his team was a huge coup that he worked a long time to secure. But that written, financial power is no excuse for presenting an incomplete proposal. Yes, that's a harsh statement, but I go back to the large red letters in the AMB/CCG proposal itself that read "To Be Determined."

Both proposals lack an economic impact analysis report

Something else missing from both proposals is an economic impact analysis report. In other words, what's the employment estimate per year, revenue from all taxes and fees, total population, and municipal costs to service the population will be. That's not a hard task to complete; when I was fresh out of Berkeley's planning grad school I created something called "The Area Redevelopment Economic Model", a spreadsheet program such that one could have both a fiscal and an economic impact report of any redevelopment project in the State of California. I used it to evaluate the then-Coliseum Redevelopment Survey Area. (Now, it's a full redevelopment area.)

The Oakland Redevelopment Agency should have insisted on this being part of the proposals from both teams. It would give the Oakland community a complete idea of what to expect from something that will completely alter the landscape of the city. Yes, some environmental impact reports have such a section, but this is too big an undertaking to wait for that. Moreover the council needs to be able to compare economic impacts of the proposals - it can't do that right now.

The City Council should combine AMB/CCG and Federal Oakland Associates

The Oakland Redevelopment Agency / Oakland City Council is not bound by the competing teams as they're presented; working as the Oakland Redevelopment Agency, the council can combine the groups into one. Let's be real honest here: this is a competition between a largely white group and a mostly black and "of color" one in an Oakland with a history of supporting minority business efforts. That to some extent is what's holding up the Council's vote; it's not said publicly, but for anyone who knows Oakland's political development landscape, that's the issue to a degree. The best way to end that racial division is to fuse the groups into one.

The new group would have to mate its development plans: take out those land uses which will not "pencil" (make money over time) and keep those plans that will. Personally, given America's push toward increasing its manufacturing base, the AMB/CCG plans look better, but the proforma numbers in the proposal support what is basically an educated guess at this point and need to be placed into a full cash balance spreasheet. I'm not at all comfortable with the lack of a real cash balance presentation in the AMB/CCG main proposal; if the project's going to be in the red or the black, show it.

Of course, they will show it in the black (making money).

Having a theater complex in a proposal - as Federal Oakland Associates does - is a terrible bet given the placement of movie content online and the negative impact that technological development is having on the theater industry overall (But at least they have the cash flow estimates installed in the proposal!) I can't see how anyone could justify the assertion that such a development would pay for itself over time. Talk about a rosy scenario!

If you want to compare the proposals yourself, you can download them here: Oakland Army Base Information Page
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